Good mortgage news out of the mish-mash of Federal Agenci

The Federal Deposit Insurance Corporation, the Federal Government Agency in charge of setting the rules under which Fannie Mae and Freddie Mac will operate has finally released the final rules for Qualified Residential Mortgages (ORM). These rules join those already in place for Qualified Mortgages (QM) and define such things as the required (or not) down payment that banks should require for mortgages. The QRM rule provides a set of requirements a loan must meet to be considered safe and eligible to be sold to investors as part of a mortgage-backed security without the lender having to retain 5 percent of the loan amount on its books. This is important because these rules define which loans the banks and other lenders may package up and sell to Fannie or Freddie or other investors. Without that ability to sell bonds backed by packages of mortgages there would be no secondary market and real estate lending would slow significantly.

The Federal Housing Finance Agency (FHFA) also announced that it  will release guidelines soon to allow increased lending to borrowers with down payments as low as 3 percent. FHFA, which regulates Fannie Mae and Freddie Mac, also will help lenders who sell loans to the mortgage giants by easing standards on borrowers who don't have perfect credit profiles. The newly released rules, and thus still to come, still require that borrowers be able to prove an ability to repay the loan. You might think that would be obvious; however, it was laxity in just that area that led to the real estate collapse. The new rules define an upper limit of 43% of the borrowers’ monthly income which can be committed to repayment of all forms of debt. That seems sensible, too.

The new guidelines provide more latitude for underwriters to consider the borrowers current ability to pay rather than focusing upon past credit issues. All of this should make mortgages easier to get, especially for first time buyers or people who might have had credit difficulties during the recent recession. This will free underwriters to focus upon the current credit worthiness of the borrower and not have to take so much risk for the bank into account.  This easing also takes some of the pressure off lenders who may have feared being required to buy back bad loans that were sold as part of packages of loans. The threat of forced buy-backs had caused lenders to become overly cautious and severely constrained loans.

There are now many more Federal agencies keeping an eye on the financial industry and real estate mortgage practices in particular; all part of the changes that took place during the recession. It’s good that they are at least getting coordinated and pointing the industry in a positive direction. Check with your loan officer about what impact these changes may have for you.

You can now find me on the new .Realtor domain at normwerner.realtor This new domain was just launched for Realtors by the National Association of Realtors (NAR), which owns the rights to manage the Domain. So, you should be seeing a lot of new wed addresses for real estate agents with that distinctive top level domain name. You can also find my posts at WikiRealty.com and at normwerner.realtytimes.com

When A House Has Good Bones

I overheard my Realtor talking about a house with good bones. What's that all about? Like many other professions, the real estate professions has developed a language of its own. What you Realtor was likely trying to say is that the house is, in his/her opinion, basically sound and has features that make it worthy of consideration. Most houses have something in their decor that potential buyers would not like in their home; however, those are mostly cosmetic or fairly superficial  things that can be overcome with modest fixer-upper projects or maybe even just some new paint. Some homes would still not be all that appealing if you replaced all of the flooring and painted every room. They might not have good bones to begin with.

So, what constitutes “good bones” in a house? That has to do with the overall structural integrity of the house, the layout of the house and the build quality of the materials and workmanship in the house. A house with good bones is not all chopped up, it has nice big rooms that flow nicely into one another and it may have the extra features that come with quality materials and finished – better natural wood flooring and woodwork, perhaps crown molding, perhaps some built-ins, perhaps a large kitchen with an island, perhaps a large master bedroom, with a nice on-suite bath and walk-in closets. These are the kinds of things that make up the underlying structure of the house – the bones. They may include and updated furnace, maybe a high basement ceiling or an extra wide garage. They are things that could not easily be changed, but which work to make the house more valuable, no matter what state its current appearance may be in.

The “bones” of the house is what you start with and upon which you plan to build. If you have good bones to start with, you can more easily get the house to the state in which you would like it to be.

Starting with a house that doesn’t have good bones may result in an on-going frustration, since it is the underlying structure of the house itself that prevents you from getting it just right. Think of it this way. There is no amount of work that you can put into a 1976 AMC Pacer that would turn it into a cool street rod that you would want to drive in the Woodward Dream Cruise. On the other hand, even a totally clapped out 1976 Camaro convertible could be the starting point for a great cruiser, if it isn’t all rusted out. Why? Because the Camaro starts with good bones and the rest can be fixed.

Having good bones has nothing to do necessarily with the age of the house. It may have something to do with condition, since even a house with good bones can become so worn out and bedraggled that it’s not worth trying to rescue. In those cases it is the land content (perhaps in a great location) that may make the house still worthy of a look-see. You’d have to be planning for a total gut job or tear-down if that is the case.

So, when you hear your Realtor tell you that a house has “good bones”; ask them to elaborate and explain to you what they see that you may not be able to recognize. I think you’ll be surprised and begin to appreciate what they are looking at that you don’t even see. Maybe their explanations will start to inspire you to look beyond the clutter and paint colors and other superficial things in the houses that they are showing you and to start seeing the “bones” of the houses that you visit. You really do want to start with a house that has “good bones” if you can find one.  

Avoid being a house of horrors…

With Halloween coming up soon many homeowners get out the decorations and turn their homes into frightening attractions for neighborhood kids. Like many other things in life, there are some who just seem to go overboard. Some may turn their entire front lawns into faux graveyards, with zombies appearing to be coming out of the graves. Some may use the giant inflatable displays of pumpkins, witches or ghosts. Trees in the yard suddenly sprout

bevies of flying ghosts or hanging skeletons.

But, what if you have your house listed for sale? If you’ve listed this is a year to keep those old Halloween decorations in storage or maybe to sell them at a garage sale in preparation for your move. It is not a year to turn you home into a house of horrors. The same goes for the inside. You want people to be able to appreciate the normal curb appeal of your home and to be abler to see the inside, without the distraction of dodging spider webs with scary, big spiders on them. What has always been cute before is now a big distraction for would-be buyers, so don’t do it.

A few small and hopefully tasteful reminders of the fall season might be OK, but avoid the big scary displays. See what to avoid by clicking here, from the Twisted Sifter web site.

The same thing will apply as we approach the Christmas season. Fortunately the Thanksgiving season is usually one of restraint and more tasteful decorations, if any; however, Christmas, like Halloween has gotten out of hand over the last decade. Huge blow-up Santa figures and snow globes with flying Santa sleighs in them have become popular. Reindeer pop up all over the place and of course there is the annual neighborhood contest to see who can put the most lights on their house. Christmas decorations have become very garish in many places, all in the name of good fun; which is certainly OK, unless you are listed for sale. Restraint and conservative, traditional decorations should be your guide when decorating for the Christmas season. Click here to see what not to do.

During the Christmas season, the more stuff that you have out and on display inside the more distracting it is for a buyer and the more that they’ll feel like they must tread lightly to avoid bumping into any of your stuff and perhaps breaking something. It can be especially annoying to people who bring their own children with them to a showing when they have to spend most of their time trying to keep their kids from touching your stuff. Remember too that anything that you have of value is subject to possible theft. Don’t tempt a would-be thief by hanging your priceless antique Christmas ornaments on the tree this year.